Associated Press WriterJERUSALEM (AP) -- Palestinian leader Yasser Arafat said Thursday he was ready to work for an immediate, unconditional cease-fire with Israel, but he stopped short of declaring a truce in the Mideast conflict.

More violence erupted Thursday night when suspected Palestinian gunmen opened fire at Eilon Moreh, a Jewish settlement near the West Bank town of Nablus, killing three people and wounding two, the Israeli military said.

Speaking at a news conference in his West Bank headquarters of Ramallah, Arafat said the Palestinians had informed U.S. envoy Gen. Anthony Zinni of "our readiness for an immediate implementation of the (U.S. truce) plan without any conditions."

Israel said Arafat's statements were not enough. "I will see the glimmer of hope...when Arafat starts to take action," Raanan Gissin, spokesman for Israel Prime Minister Ariel Sharon, told CNN. "He has to take real action. Declarations won't do."

Arafat also said the Israelis were planning a major military operation against the Palestinians. The Israelis have warned they are prepared to retaliate for a suicide bombing Wednesday that killed 20 people at a seafront hotel.

"Unfortunately, there are some aggressive preparations by the Israelis to do a wide military operation against our civilians, our cities and our refugee camps," Arafat said. His remarks, in Arabic, were not carried live on the official Palestinian television station.

Arafat said Israeli military action would undermine a peace initiative approved Thursday at the Arab summit, which calls for Arab states to normalize relations with Israel if it withdraws from land captured during the 1967 Mideast war.

Sharon's Cabinet was meeting later Thursday to consider its response to the suicide bombing, which targeted people gathered for a Passover feast in the Mediterranean town of Netanya.

The Wednesday night bombing was widely seen as a watershed because of its deadliness and timing. "They attacked innocent Israelis on one of the most sacred nights to Jewish people, Passover," said Gideon Meir, an Israeli government spokesman.

Israeli officials stopped short of formally abandoning U.S.-backed truce efforts and suggested they were hoping the Palestinians would at the last minute agree to the truce and crack down on militants who oppose ending the 18 months of violence.

But there were also indications Israel was strongly considering military moves even more far-reaching than the incursions into Palestinian towns and refugee camps several weeks ago. That sweep was Israel's biggest military operation in two decades, killed scores of Palestinians and brought on a tide of international condemnation.

Gissin said Israel had made it clear to the United States that it reserved the right to retaliate harshly if Palestinians carried out a major terror attack during cease-fire talks. "Israel will have the full right to self defense and will use appropriate measures to punish all those who perpetrated and assisted in this attack," he said.

Speaking on Israel TV, military affairs analyst Ron Ben-Ishai said senior army officers and Defense Minister Binyamin Ben Eliezer had come up with a plan to send troops into Palestinian territories to capture suspected militants and deter more attacks. The operation, which needs Cabinet approval, would exceed the scope of previous ones but would stop short of a full reoccupation, he said.

In anticipation of a possible Israeli strike, Palestinian government offices were evacuated in the West Bank. In Ramallah, worried parents took their children home early from school and residents stocked up on food.

Israeli troops tightened blockades of Palestinian towns across the West Bank and halted Palestinian traffic between the northern and southern Gaza Strip.

Several United Nations foreign staffers, particularly those with young children, left Ramallah, but there was no formal evacuation, U.N. officials said. European Union consulates also advised their nationals living in Ramallah to get out if their presence there was not essential.

Israel has already accepted Zinni's proposal for a truce timetable -- which would require Israel to gradually lift the blockade of Palestinian towns and the Palestinians to end violence against Israel and arrest militants.

The Palestinians have suffered more casualties and economic hardship than the Israelis in the conflict that began in September 2000, but Arafat nonetheless faces strong resistance to ending the uprising without a tangible political gain.

The Palestinian Authority said it "strongly condemned" Wednesday's bombing, carried out by a member of the Islamic militant Hamas group. Arafat ordered the arrests of key militants from Hamas, Islamic Jihad and the Al Aqsa Martyrs' Brigade, a militia linked to his Fatah movement.

But Israeli officials dismissed that as lip service.

A Hamas spokesman, Abdel Aziz Rantisi, said Wednesday's bombing was not an attempt to derail Zinni's mission or an Arab League summit that approved a landmark peace offer to Israel. The group is pledged to Israel's destruction.

The Arab leaders who gathered in Beirut agreed on a Saudi initiative offering Israel "normal relations" in exchange for a return of the territories Israel occupied in the 1967 Mideast war, the establishment of a Palestinian state with east Jerusalem as its capital and a "just solution" for Palestinian refugees.

Gissin said the Arab offer was "a very interesting development, something that should be pursued" -- and that Arab states should now enter into direct negotiations with Israel. But Sharon has rejected a complete return of the strategic territories Israel seized in 1967.